IDEAS home Printed from https://ideas.repec.org/p/ags/eaae14/182658.html
   My bibliography  Save this paper

Trade policy coordination and food price volatility

Author

Listed:
  • Gouel, Christophe

Abstract

Many countries adjust their trade policies countercyclically to food prices, to such extent that the use of export restrictions by numerous food exporters has occasionally threatened the food security of food importing countries. These trade policies are not consistent with the terms-of-trade motivation often retained to characterize the payoff frontier of self-enforcing trade agreements, as these policies can worsen the country’s terms of trade. This paper analyzes trade policy coordination when trade policies are driven by terms-of-trade effects and a desire to reduce domestic food price volatility. This framework implies that importing and exporting countries have incentives to deviate from cooperation at different periods: exporter when prices are high and importers when prices are low. Since staple food prices tend to have positively-skewed distributions, with more prices below mean than above but with occasional spikes, a self-enforcing agreement generates asymmetric outcomes. Although an importing country suffers less in the trade war than an exporting country, this latter has larger incentives to deviate from a cooperative trade policy because positive deviations from mean price are larger than negative ones. Thus, because of the asymmetry of the distribution of commodity prices, it may be more difficult to discipline exports taxes than tariffs in trade agreements.

Suggested Citation

  • Gouel, Christophe, 2014. "Trade policy coordination and food price volatility," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182658, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae14:182658
    as

    Download full text from publisher

    File URL: http://ageconsearch.umn.edu/record/182658/files/Gouel-Trade_policy_coordination_and_food_price_volatility-199_a.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Angus Deaton & Guy Laroque, 1992. "On the Behaviour of Commodity Prices," Review of Economic Studies, Oxford University Press, vol. 59(1), pages 1-23.
    2. Tovar, Patricia, 2009. "The effects of loss aversion on trade policy: Theory and evidence," Journal of International Economics, Elsevier, vol. 78(1), pages 154-167, June.
    3. Giordani, Paolo E. & Rocha, Nadia & Ruta, Michele, 2016. "Food prices and the multiplier effect of trade policy," Journal of International Economics, Elsevier, vol. 101(C), pages 102-122.
    4. Anderson, Kym & Nelgen, Signe, 2012. "Trade Barrier Volatility and Agricultural Price Stabilization," World Development, Elsevier, vol. 40(1), pages 36-48.
    5. Kym Anderson & Gordon Rausser & Johan Swinnen, 2013. "Political Economy of Public Policies: Insights from Distortions to Agricultural and Food Markets," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 423-477, June.
    6. Christophe Gouel & Sébastien Jean, 2015. "Optimal Food Price Stabilization in a Small Open Developing Country," World Bank Economic Review, World Bank Group, vol. 29(1), pages 72-101.
    7. Jonathan Eaton & Gene M. Grossman, 1985. "Tariffs as Insurance: Optimal Commercial Policy When Domestic Markets Are Incomplete," Canadian Journal of Economics, Canadian Economics Association, vol. 18(2), pages 258-272, May.
    8. Will Martin & Kym Anderson, 2012. "Export Restrictions and Price Insulation During Commodity Price Booms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 422-427.
    9. Turnovsky, Stephen J & Shalit, Haim & Schmitz, Andrew, 1980. "Consumer's Surplus, Price Instability, and Consumer Welfare," Econometrica, Econometric Society, vol. 48(1), pages 135-152, January.
    10. Bigman, David & Karp, Larry S., 1993. "Strategic trade policies under instability," International Review of Economics & Finance, Elsevier, vol. 2(2), pages 163-179.
    11. Giordani, Paolo E. & Rocha, Nadia & Ruta, Michele, 2012. "Food prices and the multiplier effect of export policy," WTO Staff Working Papers ERSD-2012-08, World Trade Organization (WTO), Economic Research and Statistics Division.
    12. Ryan Cardwell & William A. Kerr, 2014. "Can Export Restrictions be Disciplined Through the World Trade Organisation?," The World Economy, Wiley Blackwell, vol. 37(8), pages 1186-1196, August.
    13. Timmer, C. Peter, 2010. "Reflections on food crises past," Food Policy, Elsevier, vol. 35(1), pages 1-11, February.
    14. Wright, Brian D & Williams, Jeffrey C, 1982. "The Economic Role of Commodity Storage," Economic Journal, Royal Economic Society, vol. 92(367), pages 596-614, September.
    15. Rashid, Shahidur & Gulati, Ashok & Cummings, Ralph Jr. (ed.), 2008. "From parastatals to private trade: Lessons from Asian agriculture," IFPRI books, International Food Policy Research Institute (IFPRI), number 978-0-8018-8815-1.
    16. Philip C. Abbott, 2012. "Export Restrictions as Stabilization Responses to Food Crisis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 428-434.
    17. Cassing, J H & Hillman, A L & Long, N V, 1986. "Risk Aversion, Terms of Trade Uncertainty and Social-Consensus Trade Policy," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 234-242, July.
    18. Bagwell, Kyle & Staiger, Robert W, 1990. "A Theory of Managed Trade," American Economic Review, American Economic Association, vol. 80(4), pages 779-795, September.
    19. Caroline Freund & Caglar Ozden, 2008. "Trade Policy and Loss Aversion," American Economic Review, American Economic Association, vol. 98(4), pages 1675-1691, September.
    20. Rashid, Shahidur & Gulati, Ashok & Cummings, Ralph Jr., 2008. "From parastatals to private trade: Lessons from Asian agriculture," Issue briefs 50, International Food Policy Research Institute (IFPRI).
    21. David M. G. Newbery & Joseph E. Stiglitz, 1984. "Pareto Inferior Trade," Review of Economic Studies, Oxford University Press, vol. 51(1), pages 1-12.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brockhaus, Jan & Kalkuhl, Matthias, 2015. "Grain emergency reserve cooperation – A theoretical analysis of benefits from a common emergency reserve," 2015 Conference, August 9-14, 2015, Milan, Italy 212767, International Association of Agricultural Economists.
    2. Estrades, Carmen, 2015. "The Role of Export Restrictions in Agriculture Trade," Proceedings Issues, 2014: Trade and Societal Well-Being, December 13-15, 2015, Clearwater Beach, Florida 229229, International Agricultural Trade Research Consortium.
    3. Fabio G., Santeramo & Emilia, Lamonaca, 2018. "On the Drivers of Global Grain Price Volatility : an empirical investigation," MPRA Paper 86795, University Library of Munich, Germany.
    4. Wenshou Yan, 2016. "Political Economy of Trade and Storage Policies Coordination, and the Role of Domestic Public Storage in the World Market," School of Economics Working Papers 2016-16, University of Adelaide, School of Economics.
    5. Tiziano Distefano & Guido Chiarotti & Francesco Laio & Luca Ridolfi, 2018. "Spatial distribution of the international food prices: unexpected randomness and heterogeneity," SEEDS Working Papers 0118, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Jan 2018.

    More about this item

    Keywords

    International Relations/Trade;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:eaae14:182658. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/eaaeeea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.